You have $10,100 to invest. You decide to invest $18,000 in Google and short sell $7,900 worth of Yahoo! Google's expected return is 18% with a volatility of 36% and Yahoo!'s expected return is 12% with a volatility of 27%. The stocks have a correlation of 0.95. What is the expected return and volatility of the portfolio?

You have $10,100 to invest. You decide to invest $18,000 in Google and short sell $7,900 worth of Yahoo! Google's expected return is 18% with a volatility of 36% and Yahoo!'s expected return is 12% with a volatility of 27%. The stocks have a correlation of 0.95. What is the expected return and volatility of the portfolio?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

You own a portfolio that has $2,650 invested in Stock A and $4,450 invested in Stock B. If the expected returns on these stocks are 8 percent and 11 percent, respectively, what is the expected return on the portfolio? Stock A value Stock B value Stock A E(R) Stock B E(R) Complete the following analysis. Do not hard code values in your calculations. Portfolio value Weight of A Weight of B $ 2,650 $ 4,450 8.00% 11.00% Portfolio E(R)
You have been asked to calculate the required return for a stock that you are considering investing in. You recently looked up the risk-free rate (as measured by Treasury bonds) and found it to be 1%. You also looked up the current market return of the S&P 500 and found it to be 12. If the firm has a beta of 1.2, what is its required return?
Assume that you manage a $10.00 million mutual fund that has a beta of 1.05 and a 9.50% required return. The risk-free rate is 2.20%. You now receive another $11.50 million, which you invest in stocks with an average beta of 0.82. What is the required rate of return on the new portfolio? (Hint: You must first find the market risk premium, then find the new portfolio beta.)
Consider stocks of Firms A and B. Their expected returns are 12% and 11%, respectively, and the volatilities of their returns are 8% and 10%, respectively. Firm A has a market beta of 1.5 and Firm B has a market beta of 1.0, and the correlation between the two stocks is 0.5. Your risk-averse client wants to invest $5 million with an expected return of 15%. You can put together a portfolio with the market index, Firm A, Firm B, and a risk-free asset. Which of these four securities would you include in the portfolio and how much would you invest in each security?
you have invested in two shares, Tinkle.com and Circumbendibus Wheels. Tinkle.com has volatility 38.20%, while Circumbendibus Wheels has volatility 35.90%. The correlation between the two shares' returns is 0.44. You have allocated 50.00% of your money to Tinkle.com. What is the volatility of your portfolio?
You own a portfolio that is 25% invested in Stock X, 40% in Stock Y, and 35% in Stock Z. The expected returns on these three stocks are 10%, 13%, and 15%, respectively. What is the expected return on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Expected return
Suppose the market risk premium is 5% and the risk-free interest rate is 4%. Using the data, calculate the expected return of investing in a. Starbucks’ stock-Equity Beta:0.80b. Hershey’s stock-Equity Beta:0.33c. Autodesk’s stock-Equity Beta:1.72
The risk-free rate of return is 3 percent, and the expected return on the market is 7 percent. Stock A has a beta coefficient of 1.3, an earnings and dividend growth rate of 5 percent, and a current dividend of $2.10 a share. Do not round intermediate calculations. Round your answers to the nearest cent. What should be the market price of the stock? $ If the current market price of the stock is $91.00, what should you do? The stock -Select-shouldshould notItem 2 be purchased. If the expected return on the market rises to 13.1 percent and the other variables remain constant, what will be the value of the stock? $ If the risk-free return rises to 4.5 percent and the return on the market rises to 13.9 percent, what will be the value of the stock? $ If the beta coefficient falls to 1.2 and the other variables remain constant, what will be the value of the stock? $ Explain why the stock’s value changes in c through e. The increase in…
2B) You have $600,000 to invest in the stock market. Suppose you invested one-third of your wealth in stock Q and the rest in stock L. These stocks have the following characteristics: Stock Q has an expected return of 10% and a standard deviation of 7%. Stock L has an expected return of 18% and a standard deviation of 11%. Determine the expected return and standard deviation on a portfolio of stocks Q and L, when the two stocks are uncorrelated and when they are negatively perfectly correlated. Interpret and compare your answers in these two cases.
You own a portfolio that has a total value of $250,000 and it is invested in Stock D with a beta of 79 and Stock E with a beta of 1.46. The beta of your portfolio is equal to the market beta. What is the dollar amount of your investment in Stock D? $78,358.21 $58,768.85 O $39,179.50 O $68.563.43 O $171,641.79
You own a portfolio that has $7,806 invested in Stock A and $9,747 invested in Stock B. If the expected returns on these stocks are -0.13 and 0.23, respectively, what is the expected return on the portfolio? Enter the answer with 4 decimals (e.g. 0.1234).
You want to create a portfolio equally as risky as the market, and you have $250,000 to invest. Given this information, fill in the three missing pieces of information in the following table. Show your calculations: Investment Betal 0.90 Asset Stock A $50,000 Stock B $70,000 Stock C Risk-Free Asset 1.25 1.60

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS